Who was the retailer when PTAs acted as agents for a book seller at school book fairs?

Plain-English summary

An unidentified book seller believed a preliminary-hearing report and two Out-of-State District letters showed conflicting staff positions on PTA-sponsored book-fair sales. Tax Counsel disagreed. The earlier representative lacked the hearing facts when writing the first letter, and the later letter agreed with the hearing officer after those facts were available.

Under the facts presented at the earlier preliminary hearing, the PTAs were the book seller's agents, and the seller made direct retail sales to students. The seller therefore owed sales tax on its California gross receipts measured by the books' retail price, while the students were the consumers.

Section 6370 treated PTAs as consumers of property they themselves sold when profits were used exclusively for PTA purposes. That rule did not apply because, on the incorporated hearing facts, the PTAs did not sell the book-fair books and merely acted for the seller.

The letter separately reviewed the seller's Book Fair Remittance Worksheet. It reportedly let a PTA take its commission either by deducting 30 percent cash from its payment to the seller or taking books with a stated value corresponding to a 40 percent commission. In the worksheet example, transferring books with a purported $620.19 value in exchange for surrender of a $465.74 cash commission was a sale from the book seller to the PTA for $465.74.

Source and live-annotation limits

The PDF does not include the July 2 request letter, March 20, 1984 preliminary-hearing report, May 30 and June 12, 1985 staff letters, or Book Fair Remittance Worksheet. It identifies no seller, PTA, school, student, book, fair, agency agreement, remittance practice, price list, order, invoice, payment, cash commission, book transfer, return, tax calculation or payment, audit record beyond the referenced hearing, assessment, claim, appeal, implementation, or later outcome. The decisive agency facts and worksheet terms are Staff Counsel's account of absent records.

The source names the Out-of-State District representative as Lucian Khan and Mr. Khan, but once calls him Mr. Kahn; the original-text section preserves both spellings.

The live annotation preserves a PTA acting as a book seller's agent at a book fair, taxable retail sales, book seller as retailer, section 6370's inapplicability, and date. It omits the requester and author, claimed staff split, preliminary hearing and three prior records, their differing information, students as consumers, California gross-receipts and retail-price measures, the PTA-profit condition, worksheet and two commission methods, dollar example and seller-to-PTA sale, missing records, inconsistent name spelling, and absent implementation and outcome.

What this means for you

Book sellers, PTAs, schools, and tax professionals

The tax result depends on who is actually making the student sale. Preserve written agency and book-fair agreements, school and PTA authorizations, title and risk terms, marketing, orders, invoices, receipts, payment flows, remittance worksheets, retail prices, cash and book commission options, book values and transfers, profit use, returns, tax calculations, and payments. Do not infer an agency relationship solely from PTA sponsorship; the operative hearing facts are absent here.

Common questions

Did section 6370 exempt the book-fair sales?

No, because the PTAs acted as agents rather than selling the books themselves.

Who owed tax on the student sales?

The book seller, measured by its retail selling price.

How did California treat books taken instead of cash commission?

As a sale by the book seller to the PTA for the cash commission surrendered.

Did the published letter include the facts that established agency?

No. It relied on facts presented in an earlier preliminary hearing report that the PDF does not reproduce.

Was there actually a split of staff authority?

Tax Counsel said no: the first representative lacked the hearing facts, while his later letter agreed with the hearing officer.

Was $620.19 the tax measure for the books taken as commission?

No. The letter called that a purported value and treated the seller-to-PTA consideration as the $465.74 cash commission surrendered.

Citations and references

• California Revenue and Taxation Code § 6370
• March 20, 1984 preliminary-hearing report by H. L. Cohen — supplied with the request but not included
• May 30 and June 12, 1985 Out-of-State District letters by Lucian Khan — supplied with the request but not included
• Book Fair Remittance Worksheet — described but not included
• July 2, 1985 request letter — not included
• Seller, PTA, school, fair, agency, book, student, pricing, transaction, commission, reporting, tax, and later-proceeding records — implicated but not documented

Verbatim support

From the official Tax Counsel letter:

Mr. Cohen responded to specific facts presented to him at a preliminary hearing to conclude that PTAs are agents of REDACTED TEXT and that REDACTED TEXT makes sales of books directly to the students; therefore, sales tax applies to the gross receipts of REDACTED TEXT sales in California.

However, under the facts presented to Mr. Cohen, the PTAs do not sell the books at REDACTED TEXT book fairs. The PTAs are merely agents for REDACTED TEXT, and it is REDACTED TEXT which sells the books to the students.

Using the figures given in the example on the worksheet, Mr. Khan concluded, and we agree, that where REDACTED TEXT transfers books that have a purported value of $620.19 to a PTA in exchange for the PTA's cash commission of $465.74, REDACTED TEXT makes a sale of the books to the PTA for a consideration of $465.74.

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: https://cdtfa.ca.gov/lawguides/vol2/suta/390-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/390-0935.pdf

Original ruling text

390.0935

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
(916) 445-6450
August 27, 1985

REDACTED TEXT

Re: REDACTED TEXT
Dear Mr. REDACTED TEXT:
This is in reply to your July 2, 1985 letter regarding the application of sales and use tax to sales of books by REDACTED TEXT, through parent-teacher association (PTA) sponsored book fairs. You sent a copy each of a March 20, 1984 preliminary hearing report by Hearing Officer H. L. Cohen of the board's legal staff, a May 30, 1985 letter by Senior Tax Representative, Lucian Khan of the board's Out-of-State District Office, and a June 12, 1985 letter by Mr. Khan. You believe that the hearing report and letters seem to indicate a split of authority as to the application of tax to sales of books through the PTA sponsored book fairs. You believe that, under Section 6370, Revenue and Taxation Code, the PTAs are the consumers of the books sold at the book fairs. We disagree that the letters indicate a split of authority between the members of the staff. Mr. Cohen responded to specific facts presented to him at a preliminary hearing to conclude that PTAs are agents of REDACTED TEXT and that REDACTED TEXT makes sales of books directly to the students; therefore, sales tax applies to the gross receipts of REDACTED TEXT sales in California. Mr. Kahn was not aware of such facts when he wrote the May 30, 1985 letter. Mr. Khan's letter of June 12, 1985, expressed the same opinion as the hearing officer; that is, where PTAs are merely agents of REDACTED TEXT, tax is due on the retail price of the books that REDACTED TEXT sells to the students. We agree that, under Section 6370, PTAs are consumers of tangible personal property which they sell when the profits are used exclusively in furtherance of the purposes of the PTAs organizations. However, under the facts presented to Mr. Cohen, the PTAs do not sell the books at REDACTED TEXT book fairs. The PTAs are merely agents for REDACTED TEXT, and it is REDACTED TEXT which sells the books to the students. In such case, the students are the consumers of the books. You also asked that we review Mr. Khan's evaluation of REDACTED TEXT form, "Book Fair Remittance Worksheet” (worksheet). The worksheet provides that a PTA may take its

commission payment from REDACTED TEXT either by deducting 30% cash from the PTA's payment to REDACTED TEXT or by taking books with a value that would amount to a 40% commission. Using the figures given in the example on the worksheet, Mr. Khan concluded, and we agree, that where REDACTED TEXT transfers books that have a purported value of
$620.19 to a PTA in exchange for the PTA's cash commission of $465.74, REDACTED TEXT makes a sale of the books to the PTA for a consideration of $465.74. We hope this answers your questions; however, if you need further information, feel free to write again. Sincerely,

R. L. Dick
Tax Counsel
RLD:hb